Inventories Push Oil Prices Lower

Published on Wednesday, 01 February 2012 17:34 Written by Todd Shriber

New York, February 1^st (TradersHuddle.com) – As was speculated on yesterday, oil futures declined after the U.S. Energy Department said oil inventories jumped 4.18 million barrels to 338.9 million last week. That’s well above the 2.6 million-barrel increase that was forecast and the data was enough to push oil futures to a six-week low as NYMEX-traded crude for March delivery slumped 87 cents to $97.61 a barrel. Brent crude for March delivery gained 58 cents to settle at $111.56 a barrel. Brent’s premium to West Texas Intermediate now rests at its widest levels since November, Bloomberg reported.

Oil was higher earlier in the session on supportive economic data from China, Germany and the U.S. China’s purchasing managers’ index climbed to 50.5 from 50.3 in December, topping analysts’ forecasts. In U.S. economic news, the ADP Employer Services survey of private employers showed 170,000 private sector jobs were added last month, below the 182,000 economists expected. The Labor Department reports January jobs data on Friday. The ISM’s manufacturing index for January rose to 54.1 from 53.1. Economists expected a January reading of 54.5. Readings above 50 are generally considered positive.

Looking at oil equities, it was another mixed bag for the U.S. majors as Chevron (NYSE: CVX) continued lower, but Exxon Mobil (NYSE: XOM) eked out a small gain. Shares of Marathon Oil (NYSE: MRO) were strong in the morning, but that performance waned to just a small gain by the time the closing bell sounded. The company reported fourth-quarter earnings of $549 million, or 78 cents per share, and said it finished 2011 with a $500 million cash balance. The company added that it plans to expand in the Bakken an Eagle Ford shales, two of most promising U.S. oil shale plays.

Additionally, the company said it is making some progress in the Kurdistan region of Northern Iraq, also said lost production in Libya hampered fourth-quarter results. Fresh from a spinoff of its downstream operations, Marathon also said it is considering an IPO of its limited partnership in its midstream pipeline operations. The company also said it will repurchase $2 billion of its own shares.

Speaking of rewarding shareholders, Royal Dutch Shell (NYSE: RDS-A), the largest European oil company, closed higher a day after Bloomberg reported the Anglo-Dutch oil giant may raise its dividend for the first time since 2009. Analyst are speculating Shell will boost its dividend almost 5% in 2012 to $1.76 a share, Bloomberg reported.

An dividend increase from Shell may put pressure on rival BP (NYSE: BP) to hasten asset sales so Europe’s second-largest oil company can bolster its balance and pay a higher dividend. Shell currently yields 4.7%, nearly a full percent more than BP.